Journalists and the Stock Market
Mon, 20 Feb 2012 23:23:22 GMT
We use exogenous scheduling of Wall Street Journal columnists to identify a causal relation between financial reporting and stock market performance. To measure the media's unconditional effect, we add columnist fixed effects to a daily regression of excess Dow Jones Industrial Average returns. Relative to standard control variables, these fixed effects increase the R2 by about 35%, indicating each columnist's average persistent "bullishness" or "bearishness." To measure the media's conditional effect, we interact columnist fixed effects with lagged returns. This increases explanatory power by yet another one-third, and identifies amplification or attenuation of prevailing sentiment as a tool used by financial journalists.
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